Gardner Intelligence Blog

Durable Goods Orders Rate Continues Trend

New orders for real durable goods in April totaled $245,248 million, which was down 2.7% from one year ago. April was the third-straight month that new orders contracted more than 2.2%. These are the first consecutive months of contraction since early 2017. The annual rate of growth decelerated for the sixth month in a row, moving from 3.6% to 2.6%. This was the slowest rate of annual growth since August 2017.

Compared with one year ago, few orders for motor vehicles and parts grew just 0.9% in April. That was the slowest month-over-month growth since orders contracted in May 2018. The annual rate of growth accelerated 5.2% and should to decelerate more in future months. 

Durable Goods Spending Growth Continues 2019 Trend

In April, the month-over-month rate of growth for durable goods spending was 2.9%, which continued the trend of significantly slower month-over-month growth since December 2018. In fact, the month-over-month rate of growth was slower than the historical average of 5.5% since September 2018.  Because of the relatively weak month-over-month rate of growth, the annual rate of growth decelerated for the eighth consecutive month. It fell to 4.2%, the slowest rate of annual growth since September 2010.

In April, the year-over-year change in the 10-year Treasury rate was -0.53%, which was sixth consecutive month the change declined and the fourth-straight month the change was below zero. April’s change in the rate was the lowest since January 2018. A decreasing year-over-year change in the real 10-year Treasury rate should lead to increases in all of these data points down the line.

Disposable Income Gets Revised for April

In April 2019, real disposable income was $14,575 billion, an increase of 2.2% compared with one year ago. That was the second slowest rate of income growth since February 2017 (only last month was slower). In addition to the slowing rate of growth – dropping from its peak of 3.6% in December 2017 – the previous five months of disposable income generally was revised lower. Typically, real disposable income sets an all-time high almost every single month, but April’s income level was lower than February 2018 and December 2017. 

The annual rate of growth was unchanged at 2.7%, but it was down from 2.8% growth in December through February. The annual rate of growth has been consistent at either 2.7% or 2.8% since January 2018. With March and April’s much slower growth, it is likely that the annual rate of growth in disposable income will decelerate more in the months ahead.

 

In February, Gardner provided a slowing-growth outlook for the packaging and container industry based on actual financial results from the third quarter of 2018 along with Wall Street’s consensus projections. At that time, capital expenditures had grown strongly over the trailing twelve months while earnings before interest, depreciation and amortization (EBITDA) were growing at nearly 15% and projected to grow even more quickly through the fourth quarter of 2019. The 2019 outlook for the industry at that time looked very promising.

There were 118,700 housing permits filed in April 2019. This was the most permits filed since June 2018 and the second consecutive month with more than 105,000 permits filed. While permits still contracted 1% month-over-month, the rate of contraction was the slowest in the last four months. With four-straight months of month-over-month contraction, the annual rate of change decelerated to 0.0% in April, making it the first month that housing permits failed to grow on an annual basis since September 2011.

However, the 10-year Treasury rate is indicating that the subtle signs of improvement in housing permits could continue in the months ahead. In April, the year-over-year change in the 10-year Treasury rate was -0.53%, which was sixth consecutive month the change declined and the fourth-straight month the change was below zero. April’s change in the rate was the lowest since January 2018. 

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